View
215
Download
0
Category
Preview:
Citation preview
8/13/2019 Human Relations 2005 Wall 429 62
1/35
8/13/2019 Human Relations 2005 Wall 429 62
2/35
The romance of human resourcemanagement and business performance,
and the case for big science
Toby D. Wall and Stephen J. Wood
A B S TRA C T It is often assumed that research over the last decade has established
an effect of human resource management (HRM) practices on
organizational performance. Our critical assessment of existing
studies finds that, although collectively they have opened up a
promising line of inquiry, their methodological limitations make such
a conclusion premature. We argue that future progress depends on
using stronger research methods and design that, in turn, will require
large-scale long-term research at a level of magnitude that probably
can only be achieved through partnerships between research, prac-
titioner and government communities. We conclude that progress
so far justifies investment in such big science.
KE YW ORD S company performance high performance work organization
high performance work systems human resource
management organizational performance
Picture the scene. A leading scholar specializing in human resource manage-
ment (HRM) is called to court as an expert witness by an international
company that has brought a case against a firm of consultants. The company
has paid several hundred thousand pounds in consultancy fees, and investedmany times that amount in its personnel function, to introduce the perform-
ance-enhancing HRM practices recommended by the consultants. Three
years on there is no evident return on their investment. The company is suing
4 2 9
Human Relations
DOI: 10.1177/0018726705055032
Volume 58(4): 429462
Copyright 2005
The Tavistock Institute
SAGE Publications
London, Thousand Oaks CA,
New Delhi
www.sagepublications.com
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
3/35
the consultants on the grounds that they created misleading expectations of
the effect of HRM practices on performance. The expert witness is asked to
prepare a report addressing two questions: (i) whether it was reasonable of
the consultants to assume an effect of HRM practices on performance on the
basis of both researchers accounts of their own findings and how prac-
titioners have been encouraged to view them; and (ii) the extent to which the
evidence can, in fact, be interpreted as establishing such a causal link. In this
article we present the report that we would have submitted were we the
expert witness. Having adopted this format, we conclude by considering the
implications of our assessment for future research. First, however, we intro-
duce the core concepts.
Conceptual background
HRM is a term used to represent that part of an organizations activities
concerned with the recruitment, development and management of its
employees (Wood & Wall, 2002). Within that domain, current interest is
focused on HRM systems emphasizing all or most of the following practices:
sophisticated selection methods, appraisal, training, teamwork, communi-
cations, empowerment, performance-related pay and employment security.Collectively, these are deemed to contribute to the skill and knowledge base
within the organization, and to employees willingness to deploy their
learning to the benefit of the organization. For this reason, authors have used
labels such as human capital-enhancing (Youndt et al., 1996), high
commitment (Wood & de Menezes, 1998) or high involvement (Guthrie,
2001; Vandenberg et al., 1999) to characterize the approach. They often
contrast this with traditional, Tayloristic or control approaches to manage-
ment, which emphasize low skill, limited employee discretion and a tightdivision of labour (e.g. Arthur, 1994; Lawler, 1986; Walton, 1985).
The rationale for focusing on the high-commitment approach to
HRM lies in the assumption that the practices will enhance organizational
performance. Related to this is the view that the practices will be a source
of unique and sustainable advantage because, unlike other initiatives such as
the introduction of new technology, they result in skills and knowledge that
are largely organization specific and are therefore difficult to imitate
(e.g. Barney, 1991, 1995). Companies can copy one anothers technologies
much more easily than they can their human resource capabilities.The link between HRM and performance has been conceived in a
variety of ways. The simplest view is that practices are additive (the more
the better, e.g. Guest & Hoque, 1994), and that they enhance performance
regardless of circumstance (a universal effect, e.g. Pfeffer, 1994). Alternative
Human Relations 58(4)4 3 0
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
4/35
perspectives emphasize various kinds of fit, of which three main types have
been identified (Wood, 1999). Internal fit posits synergy among the prac-
tices, meaning that their collective effect will be greater than the sum of their
individual parts. For example, it might be argued that selecting able people
without training them, or training employees but not empowering them to
use that training, will have little effect; whereas implementing the three prac-
tices together will. Indeed, Barney (1995) goes so far as to argue that indi-
vidual practices have limited ability to generate competitive advantage in
isolation (p. 56).
The second type is organizational fit, which concerns the role of HRM
in enhancing the effectiveness of other organizational practices or technolo-
gies, and vice versa. Lawler et al. (1995), for example, link HRM to totalquality management (TQM), arguing that the two sets of practices are
complementary in their impact on organizational performance (p. 144).
Similarly, MacDuffie (1995) sees high commitment HRM practices as
integral to the effectiveness of lean production (Womack et al., 1990) initia-
tives and vice versa.
The third and final type is strategic fit. This assumes that HRM prac-
tices need to be aligned with the organizations strategy (e.g. in the case of
private businesses to their competitive strategy) to have their full effect on
performance (e.g. Miles & Snow, 1984; Schuler & Jackson, 1987; Youndtet al., 1996).
Empirical investigation of fit typically involves testing for interaction
effects (e.g. among different practices, or between HRM system measures
and strategy). Because fit is central to many accounts of the effects of HRM
on performance, it is relevant to determine the extent to which such inter-
actions have been examined. In practice, as we shall see, much empirical
work ignores or pays only limited attention to issues of fit, consciously or by
default taking the universal thesis propounded by Pfeffer (1994) and others.
Is an HRM effect on performance presumed by researchers
and practitioners?
We can now return to the first question we have been asked to consider as
expert witnesses, whether authors portray research findings as confirming a
causal effect of HRM on organizational performance, in support of the
guiding theory. There can be little doubt that such an interpretation is wide-spread. Early reviews of the field fuelled this perception as they concluded
that studies supported the universal thesis (e.g. Becker & Huselid, 1998;
Guest, 1997). Becker and Gerhart (1996: 779), for example, argue that
conceptual and empirical work . . . has progressed enough to suggest that
Wall & Wood The romance of HRM 4 3 1
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
5/35
the role of human resources can be crucial. Such views have permeated
subsequent studies. Way (2002: 765), for instance, states that Theoretical
and empirical HRM research has led to a general consensus that the method
used by a firm to manage its workforce can have a positive impact on firm
performance.
A more subtle way in which authors imply an established performance
effect lies in the labels many use to denote salient HRM systems. For
example, in his seminal study, Huselid (1995) uses the expression high
performance work practices (p. 635), mirroring Lawler et al.s (1995, 1998)
choice of high performance organizations for their book titles. Subse-
quently, Delaney and Huselid (1996) refer to performance-enhancing
(p. 949) HRM practices, Kalleberg and Moody (1996) to high performancework organizations (p. 114), and Appelbaum et al. (2000) and Way (2002:
765) to high performance work systems. The titles of many articles carry
the same message. For example, an early article by Arthur (1994) is entitled
Effects of human resource systems on manufacturing performance and
turnover. Following Huselids (1995) lead in his article on The impact of
human resource management practices on turnover, productivity and corpo-
rate financial performance (our italics), many other authors, also describing
cross-sectional results, use equivalent causal terminology (e.g. Ahmad &
Schroeder, 2003; Bae & Lawler, 2000; Delaney & Huselid, 1996; Jayaramet al., 1999; Vandenberg et al., 1999; Wright et al., 2003). The idea of causal-
ity is thus embedded within the choice of label for HRM systems and in
the wording of titles. Such terminology is in danger of appearing to prejudge
the very relationship under investigation, as if the researchers role were to
find evidence for a widely expected (and one might say, even hoped for)
relationship.
A further way in which the discourse of research implies an established
effect of HRM on performance is through the argument that it is now timeto move on to other issues. In this vein, Delery (1998) suggests that Estab-
lishing that HRM practices are linked with firm effectiveness is an import-
ant first step . . . however, there is little understanding of the mechanisms
through which HRM practices influence effectiveness (p. 289). Similarly,
there have been calls to broaden the outcomes studied to cover those of more
immediate interest to employees. Ostermans (2000) study of High perform-
ance work organization practices follows this lead, as he set his objective to
determine whether their productivity and quality gains redounded to
employees benefit (p. 179). He examines the not unimportant question ofwhether these practices are associated with layoff rates and compensation
gains; but in so doing he simply assumes, without proof, that there are gains
to redound (i.e. share among employees).
Human Relations 58(4)4 3 2
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
6/35
A final indication of the way in which a causal effect is assumed relates
to practice. In their review of research, Becker and Gerhart (1996) set their
goal as being to demonstrate to senior human resources (HR) and line
managers that their HR systems represent a largely untapped opportunity to
improve firm performance (p. 780). That message has clearly got through,
as evident from Coopers (2000) article in a leading UK HRM practitioner
journal, which concludes: Academic studies have established a link between
HR and profitability. The race is now on to find out how and why people
policies make a difference to shareholders (p. 28). Again, Philpott (2002)
concludes that:
What is missing, says the CIPD [the UKs Chartered Institute of Person-
nel Development], is a genuine appreciation both that people manage-
ment holds the key to increased productivity and that meeting the
objective requires the appropriate application of a range of people
management practices. In general terms these practices encompass,
recruitment, training, job appraisal and reward, job design, job quality
and communication with staff.
(p. 5)
One should record that some have been more circumspect in their assess-
ments (e.g. Delaney & Godard, 2001; Marchington & Grugulis, 2000;Wood, 1999). Wright and Gardner (2003), for example, go only so far as to
suggest that evidence mounts that HR practices are at least weakly related
to firm performance (p. 312). Godard (2004) is even more sceptical. Though
not doubting that HRM can be highly effective in some work places
(p. 355), he concludes that, especially in liberal market economies, the gener-
alizability is likely to be low. Nevertheless, the message conveyed by a large
part of the literature is that HRM practices do promote performance.
Expert witness testimony: part 1
Our evidence on the first question is clearly in favour of the defence. It shows
that it was reasonable for the consultants to assume a positive effect of HRM
practices on performance on the basis both of researchers portrayal of their
own findings and how these have been presented in non-academic circles.
Does the evidence support an HRMperformance effect?
To address the second question, concerning the extent to which the evidence
can be interpreted as establishing a causal effect of HRM on performance,
Wall & Wood The romance of HRM 4 3 3
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
7/35
we evaluate key empirical studies. What follows is an account of the method
we adopted, and our findings.
Sampling the studies
We used five criteria to select the studies to be evaluated. First, we restricted
our choice to those appearing in reputable refereed journals, to ensure that
we were assessing high-quality studies. This meant that other influential
work, published, for example, in books or reports, was excluded (e.g. Appel-
baum et al., 2000; Ichniowski, 1990; Lawler et al., 1995, 1998). Second, we
restricted our selection to studies published from 1994 onwards, when
research on HRM and performance first came to prominence. Third, weincluded only those studies covering multiple HRM practices, because the
focus is on whether the HRM system as a whole promotes overall organiz-
ational performance. This excluded any studies of single practices such as
training, sophisticated selection, or job design. Fourth, we included only
studies using measures of economic performance such as productivity, profit
or return on assets. Thus we excluded studies limited to other performance
indicators such as labour turnover, absence or employee well-being. Finally,
because of the detailed assessment involved, we restricted the sample to
highly cited milestone studies of the mid- to late-1990s, and a selection ofmore recent ones (whose citation rate is yet to be determined). The studies
we used are shown in Table 1.
Assessing the studies
In order to assess the evidence, we identified key criteria relevant to gener-
alization and causal interpretation against which to judge studies individu-
ally and collectively. Those criteria concern: the sample and response rate;the reliability and validity of the HRM measure and source of data for it;
the adequacy of the research design; the extent to which other factors have
been controlled; the strength of the findings on the HRMperformance link;
whether there has been a test for fit; and finally if the effects of individual
HRM practices have been considered alongside those of the composite HRM
measure. We expand on these criteria and the rationale for their choice in
the course of presenting findings.
Sample and response rate
The size of samples used affects the power to detect main effects, and even
more so theoretically predicted synergies (interactions). Coupled with the
Human Relations 58(4)4 3 4
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
8/35
response rate, size also affects the extent to which one can generalize. It can
be seen (Table 1, column 2) that the studies have diverse but often rather
small (< 300 in 18 of the 25 studies, and < 100 in 9 studies) samples (column
2). At the same time, the response rates, though varying between 4 and 84
percent, are generally low albeit better than the 628 percent (mean 17.4%)
rate reported in an earlier review by Becker and Huselid (1998). This is not
a very secure foundation from which to generalize.
HRM dimensions
Evidence that the studies use appropriate and broadly equivalent measures
of HRM is important to justify treating them collectively. As previouscommentators have noted (e.g. Becker & Gerhart, 1996; Dyer & Reeves,
1995; Wright & Gardner, 2003) there is diversity across studies in the
particular practices covered. Nonetheless, there is much commonality as
studies typically cover a substantial range of the following: sophisticated
selection, appraisal, training, teamwork, communication, job design,
empowerment, participation, performance-related pay/promotion, harmo-
nization, and employment security (Table 1, column 3).
HRM measure type and source
In any empirical investigation reliable measurement of independent variables
(in this case HRM practices) is of paramount importance; and in cross-
sectional research, ensuring such measures are uncontaminated by those of
the dependent variables (i.e. performance) is of particular significance. In
studies of HRM, the measurement of relevant practices cannot be a straight-
forward process, because the focal construct is not of that nature. Whether
there is a bonus scheme in operation may be easy to establish, but judge-ments of the extent of teamwork or empowerment are much more compli-
cated to gauge. Thus, quantifying HRM practices involves judgement.
Consequently, it is open to random measurement error. At the same time, it
is vulnerable to correlated error in the form of rater bias. For example, more
optimistic or organizationally committed individuals rating both the prac-
tices and performance in their own company might give systematically higher
scores than their more pessimistic counterparts elsewhere. Such common
method variance alone could create spurious relationships among HRM
practices and between them and performance.Given these considerations, the measurement of HRM practices would
ideally involve: assessments from two or more persons (to determine
reliability), the use of the same raters across different organizations (to
Wall & Wood The romance of HRM 4 3 5
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
9/35
Table 1 Measurement features of empirical studies on HRM and organizational performance
Study Sample and response HRM dimensions and illustrative HRM measure type and so
rate (%) components
1 Arthur (1994) 30 US mini steel Two contrasting types of HRM system: Questionnaire; single-sou
mills; 56 percenta control and commitment (low and high HR managers
respectively on decentralization,
participation, training and skill)
2 Guest and 119 UK Four a priori types: 2 2 whether or Questionnaire; single-sou
Hoque (1994) greenfield mainly not claim HRM strategy and use more or principal HR manager or
manufacturing less than half of 22 HRM practices senior line manager
companies; (e.g. selection, job design)39 percenta
3 Huselid 968 US Two scales: skills and structures Questionnaire; single-sou
(1995) companies with (e.g. communications, QWL, training, mailed to senior HRM
100+ staff; grievance procedures); and motivation professional
heterogenous sample; (e.g. performance appraisals, promotion
28 percent on merit)
4 MacDuffie 62 car-assembly Two scales: work systems (participation, Questionnaire; a contact
(1995) plants, worldwide; teams, quality role) and HRM policies person, often the plant
69 percenta (selection, performance-related pay, manager; sections compl
training). Also a use of buffers (lean by different people; later production) scale visits/telephone checks
5 Delaney and 590 for-profit and Five scales: staffing selectivity, training, Telephone survey; single-s
Huselid (1996) non-profit US firms, incentive pay, decentralization, internal (multiple respondents in
heterogenous; promotion cases); unspecified
51 percent representatives
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
10/35
6 Delery and 216 US banks Seven scales: internal promotion, Questionnaire; single-sou
Doty (1996) (down to 101 in training, appraisal, profit-sharing, senior HR manager (+ st
some analyses); security, participation, job specification; from president)
18 percenta and two strategy measures
7 Koch and 319 US business Separate HR planning index, Hiring Questionnaire; single-sou
McGrath units; 4 percenta index and Development index; and sent to executives(1996) composite HR sophistication index
(previous three added together)
8 Youndt et al. 97 US manufacturing Two scales: administrative HR Questionnaire; multiple s
(1996) plants (metal-working (e.g. appraisal, incentives) and human (at least two respondents
industry); 19 percenta capital-enhancing HR (e.g. selection and plant, mean score); gener
training for problem-solving, salaried pay) functional managers
9 Huselid et al. 293 US firms: Two scales: strategic HRM (teamwork, Questionnaire; single-sou
(1997) heterogenous empowerment) and technical HRM executives in HR (92%)
(e.g. manufacturing, (recruitment, training). Ratings are not and line (8%) positions finance, misc.); of reported use, but of perceived (effectiveness of HR prac
response rate unclear effectiveness not use per se)
10 Ichniowski 36 steel production Four types of line ranging from innovative Interviews; multiple
et al. (1997) lines in 17 companies; HRM (high on incentive pay, selection, respondents; labour relat
60 percenta teamwork, employment security, training) operations managers, line
to traditional HRM (low on all above workers and trade union
components)
11 Wood and Representative Four types of workplace, ranging from high Interviews; single-source;
de Menezes sample of 1693 to low HCM (high commitment manager or senior manag
(1998) UK workplaces management) (high HCM showing more responsible for HR(806926 in analyses); appraisal, information disclosure,
84 percent communication, monthly pay)
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
11/35
Table 1 continued
Study Sample and response HRM dimensions and illustrative HRM measure type and sorate (%) components
12 Hoque (1999) 209 UK hotels; Overall HRM (21 practices used, Questionnaire; single-sou
35 percent including harmonization, job design, respondents unclear
training, merit pay)
13 Jayaram et al. 57 firms supplying Five scales: cost, quality, flexibility and Questionnaire; single-sou
(1999) automotive industry; time HRM (commitment to and training, CEOs
39 percent goals and support for), plus a generic
scale (broad jobs, autonomy)14 Vandenberg 49 North American Five scales: flexibility, incentive Questionnaire; single-sou
et al. (1999) life insurance practices, direction sharing, training, head of HR
companies; response work design
rate unclear
15 Wright 38 US petrochemical Four scales: selection, training, pay and Questionnaire; single-sou
et al. (1999) refineries; 20 percent appraisal; with participation as a HR manager
contingency variable
16 Bae and 138 firms in Korea; Single high involvement HRM strategy Questionnaire; single-sou
Lawler (2000) response rate unclear index (five sub-scales covering training, head of HR
empowerment, selection, performance-related pay, broad job design)
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
12/35
17 Fey et al. (2000) 101 foreign-owned Eight single-item measures for managers and Questionnaire; single-sou
firms in Russia; non-managers separately: promotion on 38 percent HRM manage
heterogenous sample; merit; job security; technical training; 63 senior managers
25 percent non-technical training; career planning;
decentralization; internal recruitment;
complaint resolution18 Cappelli and 433666 (see Extent of job rotation, self-managed Telephone survey; single-
Neumark research design) teams, teamwork training, cross-training, source; plant/site manage
(2001) US manufacturing pay for skill/knowledge, profit/gain sharing,
plants; response rates meetings, and TQM (as index of involvement)
unclear
19 Guthrie 164 New Zealand Single high-involvement work practices Questionnaire; single-sou
(2001)c firms, heterogenous (HIWP) scale based on 12 practices various staff from CEO to
sample; 23 percent (e.g. performance-based promotion, manager
skill-based pay, training, participation)
20 Richard and 6373 US banks; Single scale of effectiveness of strategic Questionnaire; single-sou
Johnson (2001) 1315 percenta human resource management (SHRM) HR director
practices (from Huselid et al., 1997) (Effectiveness of HR prac
tapping eight practices (e.g. participation not use per se)
and empowerment, teamwork,
employee and manager communications) Telephone survey; single-
21 Batt (2002) 260 call centres; Skill level (education and training); job source; general managers
54 percent design (discretion and teamwork); HR
incentives (supportive HR training,feedback, high pay, security).Composite
HR index of all three
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
13/35
8/13/2019 Human Relations 2005 Wall 429 62
14/35
reduce error resulting from differences in the use of rating scales), raters who
through knowledge of the use of practices in a range of organizations are
able to benchmark the development of the practice against that elsewhere (to
better calibrate the scale), and raters who are ignorant of the performance
or the organization in question (to eliminate the possibility that knowledge
of the outcome will contaminate measurement of the independent variables,
resulting in common method variance bias). In contrast, the least satisfac-
tory method is to use reports from single respondents, each describing their
own organization, and who have knowledge of, or worse still, are the source
of, the performance data.
The profile of the large majority of studies corresponds to the least
satisfactory measurement approach. Twenty-one of the 25 studies use singlerespondents (see Table 1, column 4). Moreover, in only two of the four cases
with multiple respondents (Wright et al., 2003; Youndt et al., 1996) is any
information on inter-rater agreement provided. In the other two cases
(Ichniowski et al., 1997; MacDuffie, 1995), it is unclear how the information
was combined, and the extent to which it was consistent across sources. This
is not a trivial issue, given findings by Gerhart et al. (2000) and Wright et
al. (2001) of very low levels of reliability in HR measures.
It is also the case that 24 of the 25 studies rely exclusively on respon-
dents describing only their own context. The one exception is Ichniowski etal. (1997) who characterized the HRM system across the 36 US steel
production lines in their sample themselves, on the basis of interview data
from multiple respondents (though quite how is unclear). Moreover, in those
24 studies it is reasonable to assume that those rating the extent of use of
the HRM practices were also aware of their organizations performance. In
fact, this is certain in 12 cases in which data on HRM practices and perform-
ance were obtained from the same respondent.
Thus, across the studies as a whole, measures of HRM are generallyof unknown reliability, are likely to contain considerable random measure-
ment error, and at the same time in the majority of cases are open to conta-
mination from knowledge of performance and demand characteristics.
Random error will weaken the assessment of any underlying relationship
between HRM and performance; whereas contamination of the data will
create correlated error that could result in spurious associations.
Dependent variable measurementMeasures of the dependent variable (performance) minimally should come
from a different source from that used to measure HRM practices, and
ideally would be objective to reduce the likelihood of common method
Wall & Wood The romance of HRM 4 4 1
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
15/35
variance. In many cases, such as in for-profit businesses, measures of
productivity and profit taken from official accounts will be appropriate,
perhaps supported by more industry-specific indicators (e.g. defects per
1000 cars in auto assembly, as in MacDuffie, 1995). In other instances
different measures will be appropriate, for example in charitable organiz-
ations the percentage income redistributed will be relevant. So diversity of
performance measures consistent with the nature of the business is to be
expected. Of course such measures are not necessarily totally accurate (e.g.
organizations can bring forward or postpone costs for a given financial
year), but they are generally subject to external audit and, most importantly,
are collected independently from the measurement of the HRM practices.
This contrasts with the least desirable approach that relies on reportedperformance from a single employee who is also the source of information
about the HRM practices.
The picture is more encouraging in this respect than for the measure-
ment of HRM, but is still far from ideal (Table 1, column 5). Ten of the 25
studies do use objective data, ensuring measures of performance come from
a different source than those of HRM practices. The other side of the coin,
of course, is that 15 of the studies rely on reported performance, in 12 of
which the information comes from the same person who assesses the HR
practices. It should be noted, however, that recent findings (Wall et al., 2004),suggest that such common source self-report performance data may not
necessarily be as biased as one might expect.
Research design
There are two main types of HRM-performance study. Cross-sectional
studies are those in which both the independent and dependent variables are
measured on one occasion only (be these concurrent or not); whereas inlongitudinal studies either or both the independent and dependent variables
are measured on at least two occasions. Both types of study are of value.
Cross-sectional research is a cost-effective starting point for establishing that
two or more variables are related, and the absence of a cross-sectional
relationship would send warning signals that more costly longitudinal work
might not be justified. Also, cross-sectional work often allows the use of
much larger samples and hence augments generalizability. However, for
reasons that are well known, cross-sectional studies provide a weak
foundation for causal inference, for which longitudinal research designs areto be preferred.
Within longitudinal studies, however, there are alternatives. The
simplest advance on a cross-sectional design is what we shall call the
Human Relations 58(4)4 4 2
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
16/35
quasi-longitudinal study. Studies of this kind examine how the extent of use
of HRM practices at one point in time predicts subsequent performance,
while controlling for prior (or concurrent) performance. The advantage of
this over a simple cross-sectional study (e.g. concurrent performance only) is
that it can help control for reverse causality, that prior performance fostered
greater use of the HRM practices in question. This design, however, has some
problems, especially when the timing of the introduction of the HRM prac-
tices is unknown. If those practices had been introduced, say, 5 years before
the study, and had led to better performance over the 3 years prior to the
study, then controlling for that prior performance would effectively be
removing the effect of interest. Consequently, whereas quasi-longitudinal
research that shows a positive relationship with performance adds to ourunderstanding, if it fails to do so the interpretation is unclear.
A stronger option is what we shall call the authentic longitudinal
study. Research of this kind would involve measurement of both the inde-
pendent and dependent variables on two or preferably more occasions. For
example, at Time 1 one would measure both HRM practices and perform-
ance, at Time 2 the HRM practices again, and at Time 3 performance for a
second time. The timing of the measurements would be determined accord-
ing to a hypothesized lag for the effect of HRM on performance. Evidence
consistent with a causal interpretation would require change in HRM to beassociated with a subsequent change in performance. In this way, one is
testing whether an increase (or decrease) in the use of the relevant practice(s)
is associated with a subsequent improvement (or deterioration) in perform-
ance; and stable third factors (e.g. sector, product mix) are controlled for
through the repeated measures design. The design would be further improved
by focusing only on those organizations in which the HRM practices have
been introduced (or substantially enhanced) between the performance
measurement occasions; or by intervention studies (with controls).Judged against the above criteria, the design of existing studies is
disappointing. As shown in Table 2, 21 of the 25 studies are purely cross-
sectional (Table 2, column 2), providing very weak grounds for causal infer-
ence. Moreover, 17 of these 21 cross-sectional studies are what Way (2002)
describes as temporally backward predictive (p. 779), that is to say they
involve a relationship between current HRM and prior performance. This is
self-evident where authors explicitly report having used previous perform-
ance data (e.g. Arthur, 1994; Batt, 2002). Moreover, even in those studies
that use concurrent performance (e.g. Delery & Doty, 1996; Guthrie, 2001 or the average of previous and concurrent performance data as in the case
of Youndt et al., 1996), the grounds for inferring causality, were it to be
linked to HRM, would be weak. This is because most concurrent measures,
Wall & Wood The romance of HRM 4 4 3
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
17/35
Table 2 Research design and findings of empirical studies on HRM and organizational performance
Study Research Control for Main effects (summary, Interactiodesign third factors statistical significance, hit rate) effects
1 Arthur Cross-sectional Age, size, Commitment systems show higher Not exa
(1994) unionization and reported productivity (p < .05) and
business strategy lower scrap rates (p < .05). 2/2 predicted
effects
2 Guest and Cross-sectional No No differences across four types. Not exam
Hoque (1994) 0/6 predicted effects
3 Huselid Cross-sectional For example size, Skills and structures related to GRATE Internal
(1995) capital, R&D, intensity, (p < .05, one-tail); motivation related structureunionization, sector to productivity and Tobins Q (p < .01, for GRAT
one-tail). 3/6 predicted effects for motiv
strategy
4 MacDuffie Cross-sectional Degree of Work systems related to productivity Internal/
(1995) automation, volume, (p < .05); and work systems and HRM work s
complexity, product policies to quality (at p < .05 and p < .01, policies
design, age respectively). 3/4 predicted effects productiv
buffer
5 Delaney and Cross-sectional Many, e.g. size, HRM practices collectively (block in Selected
Huselid (1996) age, product vs. regression) associated with perceived interactioservice, unionization, organizational and market performance staffing
sector (p values unspecified). 4/10 (i.e. five HR none fou
practices two performance measures)
predicted effects
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
18/35
6 Delery and Cross-sectional Size (assets), age, Appraisals (p < .05), profit sharing Strategic
Doty (1996) district (p < .01) and security (p < .01) related practices
to ROA;only profit-sharing with ROE product/
(p < .01). 4/14 predicted effects innovatio
(appraisa
7 Koch and Cross-sectional Size, sector, HR planning and hiring related to HR sophMcGrath unionization, R&D, productivity (p < .05 and p < .01 intensity,
(1996) capital intensity respectively); development and of HR is
sophistication not. 2/4 predicted effects capital in
8 Youndt et al. Cross-sectional Size, growth, change Administrative HR no effects; human Single-in
(1996) in sales, product capital-enhancing HR related to fit adm
complexity, strategy reported productivity (p < .01), but quality st
(cost, quality, delivery, not to customer alignment or machine 1/8
scope) efficiency. 1/6 predicted effects
9 Huselid Quasi-longitudinal Unionization, size, Strategic HRM related to subsequent Not examet al. (1997) R&D, sector, GRATE (controlling for concurrent,
concurent p < .05) but not productivity or
performance and Tobins Q; technical HRM unrelated
others to any performance measure. 1/6
predicted effects
10 Ichniowski Cross-sectional Up to 25 for technical Lines with innovative HRM systems No conv
et al. (1997) and longitudinal reliability (e.g. age have greater productivity (p < .01); lines system d
and speed of line) becoming more innovative in HRM producti
over time showed increased additive
productivity (p < .01). 1/1 predicted componeresults
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
19/35
Table 2 continued
Study Research Control for Main effects (summary, Interactiodesign third factors statistical significance, hit rate) effects
11 Wood and Cross-sectional Many, e.g. size No difference across four types of Not exam
de Menezes sector, unionization workplace on productivity or change in
(1998) productivity; some effect for financial
performance but not as expected. 0/3
predicted effects
12 Hoque (1999) Cross-sectional Size, unionization, Overall HRM related to productivity, Not form
country of quality and financial performance sub-grou
ownership, strategy (p < .01 in all cases). 3/3 predicted effects interactiostrategy
13 Jayaram et al. Cross-sectional Size Cost (p < .01), flexibility (p < .05) and Not exam
(1999) time (p < .05). Each aspect of HRM
related to its own outcome
(e.g. HRM cost to cost performance);
HRM generic related to time
performance only (p < .05).
4/8 predicted effects
14 Vandenberg, Cross-sectional No Flexibility positively associated with Not exam
et al. (1999) ROE; incentives and direction-sharingnegatively related to ROE; training and
work design unrelated to ROE; p < levels
unclear, and insufficient detail of analysis.
1/5 predicted effects
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
20/35
15 Wright Cross-sectional Technology, size, age Only training related to financial Internal fi
et al. (1999) performance negatively (p < .05). 0/4 appraisal
predicted effects participa
where pa
strong ne
participa16 Bae and Cross-sectional Unionization, sector, HRM strategy positively associated Not exam
Lawler (2000) country of origin with self-report (p < .05) and both
concurrent (p < .01) and subsequent
(p < .05) objective (ROIC) performance
measures. 3/3 predicted effects
17 Fey et al. Cross-sectional Sector, size, years Overal performance associated with Not exa
(2000) operating in Russia promotion on merit for managers, and
job security for other employees. 2/16
predicted effects
18 Cappelli and Longitudinal: two Many, including For none of the eight practices did their Internal fiNeumark sets of panel production function, introduction relate to either productivity managed
(2001) data, 197793, age, sector or change in productivity in the sharing. N
n = 433 and 197793 panel data set. Of the three other th
197796, n = 666 practices in the 197796 panel data interactio
set, one (job rotation) related to both training
outcomes, but negatively. Thus 0/8 and teams)
0/3 predicted effects
19 Guthrie (2001) Cross-sectional Size,age, HIWP positively associated with HIWP w
unionization, sector, reported productivity (p < .01). 1/1 (positive
relative pay predicted effect firms witretention
1/1
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
21/35
Table 2 continued
Study Research Control for Main effects (summary, Interactio
design third factors statistical significance, hit rate) effects
20 Richard and Cross-sectional Size, part of holding SHRM not related to either ROE or Strategic
Johnson (2001) company/not, productivity. 0/2 predicted effects capital in
location, ROE (HR
organizational stage positive
(e.g. start up, growth) the great
intensity
producti
21 Batt (2002) Cross-sectional Sector, unionization, Work design and HR incentives Composcustomer segment positively related to sales growth with seg
(p < .05 and p < .01 respectively); no of HR on
effect for skill level. 2/3 predicted effects residenti
22 Way (2002) Cross-sectional Sector, unionization, No statistically significant relationship Not exam
size, capital intensity with productivity ratio; positive
relationship (p < .05) with overall
perceived productivity
23 Ahmad and Cross-sectional Country, sector Practices related to performance at Not exa
Schroeder p < .05 or p < .01 in 9/12 cases. But the
(2003) analysis fails to control for other practices (all of which are highly
intercorrelated), hence proportion
of predicted effects unclear
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
22/35
24 Guest et al. Quasi-longitudinal Size, sector, Use of HRM practices unrelated to Not exa
(2003) unionization, subsequent productivity or profit (when
consultation, HR prior productivity or profit controlled).
cost strategy, prior 0/2 predicted effects
performance, others
25 Wright et al. Cross-sectional None, but all HR practices not statistically significantly Not exam(2003) (HR T1, business units in related to productivity but positively
performance T2 same corporation and related to profit (p < .05). 1/2
39 months fairly homogenous predicted effects
later)
byguestonMarch6,2013
hum.sagepu
b.com
Downloadedfrom
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
23/35
and certainly financial ones, though ostensibly covering the same period
when the HR practices data were collected, necessarily reflect the result of
prior performance. There is a lag built into performance data, as it takes time
to sell, receive payment for and bank income, which is then aggregated over
a financial year. At face value, therefore, such cross-sectional studies could
be seen as examining the effect of performance on HRM practices rather
than vice versa.
Of the four non-cross-sectional studies, two are quasi-longitudinal
(Guest et al., 2003; Huselid et al., 1997). That is to say, they include repeated
measurement of performance, but a single measurement of HRM practices.
The first of these studies controls for concurrent performance, and the other
for prior performance (Table 2, column 5). However, in neither case is it clearwhether the earlier measurement of performance preceded the introduction
of the HRM practices, so causal inference is difficult. Only two studies
(Cappelli & Neumark, 2001; Ichniowski et al., 1997) have an authentic
longitudinal design on which causal inferences about the relationship
between HRM practices and performance could justifiably be based; and, as
we shall see later, they yield divergent results.
Control for third factorsEspecially in cross-sectional studies there is a need to control for third
factors, that is, variables that may account for an association between HRM
practices and performance. For instance, if larger organizations, those with
greater (or lesser) trade union involvement, or those in particular sectors,
tend to have both more sophisticated HR provisions and better performance,
then a relationship between HR and performance would be found for one
or other of these reasons. Better studies will use controls for third factors,
less satisfactory ones will not.Overall, the studies do well in this respect. Control for third factors is
evident in all but two studies (Table 2, column 3). Size is included in the large
majority of studies, but there is considerable variability with respect to which
other factors are controlled. Our judgement, however, is that the variability
is largely consistent with the nature of the study (e.g. controls for sector in
heterogenous samples, and for product complexity when examining build-
hours on assembly lines).
Main effects
Our summary of findings for the relationship between HRM and perform-
ance is based on the most sophisticated analysis presented by the authors,
Human Relations 58(4)4 5 0
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
24/35
but before any tests for interactions. Thus if both zero-order correlations and
regression analyses controlling for third factors are presented, it is the
findings from this that are used. However, if regression analyses excluding
and including interaction terms are presented, we rely on the findings from
the former. We adopt the latter position to increase comparability between
studies that did and did not test for interactions (see next section). We also
only accept findings that are statistically significant at p < .05. For ease of
presentation in Table 2 (columns 46), and in places in the text that follows,
we refer to findings as effects in line with the allocation of variables to predic-
tor and outcome status within regression analysis. However, we do not
intend this to signify a causal link.
The main effect findings are summarized in Table 2, column 4. Theseshow that 19 of the 25 studies report some statistically significant positive
relationships between HRM practices and performance. At the same time,
however, six studies fail to find any such relationships (e.g. Cappelli &
Neumark, 2001; Guest et al., 2003), and in one of these (Wright et al., 1999)
there is a statistically significant negative relationship (between training and
financial performance). In parentheses, it is interesting to note that there is
no evidence that studies using self-report measures of performance provide
more positive findings than those using objective measures.
The balance of evidence towards positive relationships is weakenedby the lack of consistency within studies. The large majority used multiple
performance indicators, and many also used multiple HRM measures. This
means that there were multiple opportunities to show HRMperformance
relationships, of which only a few are statistically significant. This is shown
by the hit rate also reported in Table 2, column 4. In Huselids (1995)
seminal study, for example, we should judge the finding that the employee
motivation HRM scale was statistically significantly associated with
productivity and Tobins Q against the fact that the employee skills andstructures HRM scale was not statistically significantly related to either of
these performance outcomes. Correspondingly, though the employee skills
and structures HRM scale was related to GRATE, the employee motivation
HRM scale was not. Similarly, Delery and Doty (1996) identified seven
aspects of HRM and two performance indicators. Only 4 of the 14 relation-
ships were statistically significant. Other studies involving more than a
single relationship are equally patchy (e.g. Youndt et al., 1996, with one of
six predicted effects).
Moreover, effect sizes are typically small, and the criteria used to judgestatistical significance, and hence to draw conclusions about the reliability of
findings, are often lenient, even in large sample studies. With a sample of
more than 800, for example, Huselid (1995) recorded an effect size for his
Wall & Wood The romance of HRM 4 5 1
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
25/35
two comprehensive measures of HRM combined on productivity of only 1
percent, and treated one-tailed p-values of < .10 as statistically significant.
Similarly, Wood and de Menezes (1998), also with a sample of over 800
establishments, use ap < .10 statistical significance criterion.
The acceptance of small effect sizes and the use of moderate levels of
statistical significance are perhaps indicative of a more general tendency in
the literature towards over-positive interpretations of results. Guest and
Hoque (1994), for instance, distinguished between four types of HRM
system but found no statistically significant difference across them on
reported productivity or quality. This did not prevent them concluding that
the results demonstrate that strategic HRM pays off (p. 11). Virtually all
authors reach positive conclusions irrespective of the strength and consist-ency of their findings.
Interaction effects (fit)
All studies of the HRMperformance relationship would benefit from tests
for interaction effects, and this is so for several reasons. If the hypothesis is
that HRM practices have a universal effect on performance, then it adds
strength to any observed main effect to show it is invariant across different
circumstances (e.g. according to sector or company size). Conversely, iftheory predicts internal, organizational or strategic fit, then tests of inter-
actions are relevant for that purpose. Whatever the particular theoretical
rationale, the basic point is that investigating possible interaction effects is a
means of more fully understanding the nature of any observed relationship
between HRM practices and performance, and enhancing the construct
validity of the study.
Twelve of the 25 studies do not report tests for interactions. Of the
other 13, 2 test for interactions using non-standard methods (e.g. sub-groupanalysis), and the remaining 11 deploy orthodox tests (e.g. moderated regres-
sion). Looking at those studies in more detail, the emphasis is on internal
and strategic, rather than organizational, fit. However, the main impression
is of considerable variation in the interactions examined and inconsistency
in the findings recorded. Thus there is no compelling evidence either of
synergy within HRM systems (i.e. that the effects of systems as a whole is
greater than the additive sum of their parts), or of any systematic strategic
fit effects.
Individual practice effects
Most studies of the HRMperformance relationship aggregate individual
practices into multi-component scales (e.g. Huselid, 1995; Way, 2002), or
Human Relations 58(4)4 5 2
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
26/35
less commonly they group organizations on the basis of their HRM profile
(e.g. Ichniowski et al., 1997; Wood & de Menezes, 1998), in order to test
for effects. An argument for this approach is that one would expect a
composite of HR practices to have a greater impact on overall organizational
performance than any single practice. Nonetheless, all those composite
measures include particular practices (e.g. training, empowerment, and
performance-related pay) each of which may enhance performance in its own
right. Thus the question arises as to whether one or a few among those
constituent practices may account more parsimoniously for any observed
effect of the overall HRM system on performance, or whether all are an
integral part of the whole. This is not only of theoretical importance, but is
also an issue with practical significance for managers wishing to stage theimplementation of beneficial HR practices and avoid ineffectual ones. Thus
examination of the relative effects of different component practices adds to
the construct validity of the investigation.
This issue has been ignored in the majority of studies. Fifteen of the
studies (Table 2, column 5) use composite measures of HRM without report-
ing any findings for their component practices. Results for component prac-
tices from the other 10 studies do not show any consistent pattern. Given
this lack of evidence, it is difficult to be certain that it is the HRM system
that relates to performance rather than one or particular sets of itscomponents.
A wider consideration
A final methodological issue, not covered in Tables 1 and 2 because it is
largely invariant, concerns the nature of the measurement of HRM practices.
With only one exception (Huselid et al., 1997), studies have focused simply
on the use of the practices. It could be argued, however, that effective use
may be a better measure. This is because the inadequate implementation ofa given practice may do more damage than no implementation at all. For
example, adopting team briefings without allowing employees to express
ideas may have a worse effect than not considering such involvement at all.
Expert witness testimony: part 2
The second question addressed to our expert witness concerned whether
available evidence could be interpreted as establishing a causal link between
HRM practices and performance. The advice has to be that the evidence ispromising but only circumstantial. The unknown reliability of measures of
HRM, the paucity of studies with adequate research designs, and the incon-
sistent results both across and within studies is troublesome. Taken together
with the likelihood that positive findings are more likely to be published than
Wall & Wood The romance of HRM 4 5 3
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
27/35
negative ones, it is clear that existing evidence for a relationship between
HRM and performance should be treated with caution.
Summary and discussion
The conclusion from our analysis is that it is premature to assume that HRM
initiatives will inevitably result in performance gains, either in all situations
or even where deemed appropriate by contingency arguments. Consultants
who promote the HRM model are reflecting a wider academic and business
school perspective in which this approach is central to definitions of moder-
nity in management. Governments, employers associations, professionalassociations such as those representing personnel managers, and even trade
unions, throughout the world, have also promoted high-commitment HRM
as the approach most suited to the assumed increasingly turbulent inter-
national economy.
Our assessment is that, although consultants are acting in good faith,
and their views are seemingly reinforced by the presumption on the part of
academics that HRM systems actually do promote organizational perform-
ance, the empirical evidence is as yet not strong enough to justify that
conclusion. The cross-sectional evidence could be over-estimating such arelationship due to contamination between measures of the HRM and
performance. Conversely, studies could be underestimating the strength and
consistency of the relationship through inadequate measurement of HRM
practices. We lean to the latter view, because while there is little evidence of
common method bias leading to spurious conclusions (Wall et al., 2004)
there are strong indications of poor measurement of HRM practices (Gerhart
et al., 2000) that would produce attenuated effects. Moreover, regardless of
the quality of data, the paucity of longitudinal studies also makes causalinference dubious. So the evidence is at once encouraging but ambiguous.
Because there also remain strong theoretical grounds for believing an HRM
system centred on enhancing employee involvement should be beneficial for
organizational performance, research that overcomes the weaknesses of
current studies is required.
Implications
There are three main implications of our analysis. First, there is a need, onthe basis of the findings so far, to temper the claims being made. A first step
is to moderate the language used. The term high performance clearly
presupposes the very effects researchers should be investigating, and should
Human Relations 58(4)4 5 4
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
28/35
be avoided. Other terminological changes would also help foster a more
temperate debate. For example, use of words such as impact, determinant
and effect when presenting cross-sectional findings, a practice too often
evident in the existing literature, should be avoided in favour of terms such
as associated with or related to.
Second, adopting a strategy of articulating and investigating the
relative merits of competing hypotheses may encourage more rigorous and
disinterested research. This has long been advocated (see Chamberlins
method of multiple hypotheses as proposed in his presidential address to
the US Academy of Science in 1890; reprinted in Science, 1965) as a means
of combating bias in science, and is now more feasible than ever given
developments in computing and statistical methods, such as structuralequation modelling. By evaluating competing hypotheses it is less likely that
researchers will align themselves with a particular hypothesis. One of the
attractions of some of the early studies, most notably Huselids (1995) and
Delery and Dotys (1996), was precisely that they aimed to test between the
universalistic and contingency theories of HRM. However, the selection of
competing hypotheses needs to be much broader. For example, these could
include hypotheses of differential impacts of HRM systems depending on the
performance measure used. Such development must, in our judgement, go
hand-in-hand with theoretical development.Third, and most importantly, the need is for research designs that
overcome the problems of existing studies. Among these, three weaknesses
are paramount. The first is the reliance on single-source measures of HRM
practices (e.g. from CEO or HRM manager) of unknown reliability, sensi-
tivity and validity, often from the same source as the measure of perform-
ance. The second is the use of small samples coupled with low response rates.
The third is the lack of sophisticated longitudinal studies, especially ones
examining how change in HRM practices relates to subsequent change inperformance. We now discuss the methodological implications of those three
weaknesses for future research.
Independent audit of HRM practices
Others have already pointed to the need to improve the reliability and validity
of measures of HRM by obtaining data from multiple sources
(e.g. Wright & Gardner, 2003). We would go further to suggest that it is essen-
tial to have an independent audit of HRM and to cover comparison practices(e.g. R&D emphasis, total quality management). The audit should be
conducted by individuals from outside the organization but familiar with the
wider use of the practices in question, so that they can calibrate their
Wall & Wood The romance of HRM 4 5 5
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
29/35
assessments accordingly. They would draw on multiple respondents and
sources of data within organizations, and develop methods to achieve a high
degree of concordance across different auditors. They would measure both
the extent and effective use of practices, and be unaware of the performance
of the organization. The use of selected comparator practices would enable
determination of the importance of HRM practices relative to others. Because
size of effect can have limited meaning, it is instructive to know if HRM prac-
tices have a stronger or weaker relationship with productivity than other prac-
tices or factors (e.g. R&D expenditure). Expanding predictor variables in this
way also allows tests for possible interactions between HRM and such other
practices (e.g. HRM with TQM, see Lawler et al., 1995).
Large samples, high response rates
Many of the important questions are ones that also require large samples.
Testing for a relationship between HRM and performance benefits from the
control of third factors, and also from examination of the effect of individual
component practices relative to each other and to measures of overall HRM.
The more such variables are taken into account, the more convincing any
relationship is observed. However, the greater the number of variables
involved, the larger the sample size required.Sample size is even more of an issue when addressing theoretically
predicted interactions (i.e. the different types of fit), where the lack of sensi-
tivity of orthodox moderated regression means large samples are essential
(Aiken & West, 1991; Busmeyer & Jones, 1993). Of course, one could argue
that taking a universalistic perspective reduces the need for such large-scale
research. Yet, this is not so. Following our earlier call for testing competing
hypotheses, it is important to see whether the effect of HRM on perform-
ance is invariant across conditions (e.g. private vs. public sector; manufac-turing vs. finance; strategic fit) rather than leave that issue unaddressed.
Finally, of course, large sample sizes, assuming also high response rates,
provide a firmer base for generalization.
Longitudinal research designs
The final requirement we emphasize, as do others (Guest, 1997; Wright &
Gardner, 2003), is the need for longitudinal research. Some such investi-
gations could be retrospective. Thorough independent audit of HRM prac-tices, including evidence of when they were first introduced within
organizations, could be set alongside available data on performance going
back many years. Then the effect of the introduction of practices on
Human Relations 58(4)4 5 6
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
30/35
performance could be estimated. Other studies should be prospective, based
on repeated independent audits, accepting the fact that findings will not be
available for several years. The advantage of prospective over retrospective
investigation is greater sensitivity and certainty in the measurement of
change, and better coverage of both use and effective use of HRM practices.
The case for big science
The principles underlying our design criteria are well known and widely
accepted as good practice. The weaknesses in the existing research designs
cannot, therefore, be attributed to investigators being unaware of how better
to conduct research. Rather, they stem from the almost inevitable limitationsof the small-scale funding that characterizes social science. Funding for an
individual or research team, over just a few years, does not provide the
resources to deploy the recommended methods. Consider the need for inde-
pendent audit, where experience suggests that it takes at least 2 days to
obtain the requisite information for a single organization (see Patterson et
al., 2004). Given such information should be obtained separately by at least
two individuals (to determine reliability), and for large samples of organiz-
ations (say 400 in five key sectors), the data collection task alone would take
many person years (i.e. 2 people 2 days 2000 organizations = 8000days, which at 230 working days per year = some 35 person years). Add to
this the final recommendation, for the repeated measurement of practices and
performance as required by longitudinal research, and minimally the necess-
ary resource is doubled.
Research on that scale is seemingly beyond the scope of current funding
mechanisms. It is not, however, beyond the scope of more intensive collabor-
ation than is the current norm among the many potentially interested parties,
including academics, employer organizations, employee organizations,professional bodies and government departments. The involvement of
government agencies is also important to encourage the desirable level of
compliance (i.e. high response rate). Moreover, there are precedents for such
activity. There are already numerous information-collecting exercises in
many countries with which individuals (e.g. the census) and organizations
(e.g. company financial reports) have to comply. There are assessments
within organizations based on independent audits (e.g. Investors in People
in the UK); and there are surveys based on collecting data through interviews
that are designed and managed by collaborative teams involving governmentdepartments, research councils and academics, as in the case of the Work
Employee Relations Survey (WERS) series in the UK, or the equivalent
Australian survey.
Wall & Wood The romance of HRM 4 5 7
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
31/35
We propose that a big science project on management practices and
performance builds on the best features of these exercises by devising a new
study that covers practices well beyond employment relations and HRM,
uses independent audit of those practices, and is at the level of the company
or firm (rather than site) for which there is official financial performance
data. If academics, practitioners and policy makers are serious in wishing to
understand the effect of HRM and other practices on performance, then
these kinds of data will be required. They must also face the possibility, of
course, that no strong causal effects will be found.
Postscript
It will be appreciated that the focus of this article is on a particular issue
concerning HRM that has dominated recent research the relationship of
high involvement forms of HRM with organizational performance. This
should not be allowed to mask the fact that, even if such a performance effect
were not demonstrable, the use of practices that enhance employee involve-
ment may be an end in itself. Such personnel management practices also may
be an important means of providing justice and equality of opportunity.
Other reasons for studying HRM practices and systems could then include,for example, their role in enhancing employee well-being and promoting
non-discriminatory practices. It will also be recognized that the large-sample
quantitative approach taken here is a reflection of the question addressed.
Where an HRM effect on performance is established, then important ques-
tions concerning the conditions under which this applies, the mechanisms
through which it operates, and any unintended consequences of the HRM
practices, will require supplementary quantitative and qualitative investi-
gations. Such detailed research can also shed considerable light on why noperformance effects accrue when that is found to be the case. In other words,
our recommendation for big science should not be pursued to the exclusion
of complementary options.
Acknowledgements
The support of the Economic and Social Research Council (ESRC) UK is grate-
fully acknowledged. The work was part of the programme of the ESRC Centrefor Organisation and Innovation.
Human Relations 58(4)4 5 8
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
32/35
References
Ahmad, S. & Schroeder, R.G. The impact of human resource management practices on
operational performance: Recognising country and industry differences. Journal ofOperations Management, 2003, 21, 1934.Aiken, L.S. & West, S.G. Testing and interpreting interactions. Newbury Park, CA: Sage,
1991.
Appelbaum, E., Bailey, T., Berg, P. & Kalleberg, A.L. Manufacturing advantage: Why highperformance work systems pay off. Ithaca, NY: Cornell University Press, 2000.
Arthur, J.B. Effects of human resource systems on manufacturing performance and
turnover. Academy of Management Journal, 1994, 7, 67087.Bae, J. & Lawler, J.J. Organizational and HRM strategies in Korea: Impact on firm
performance in an emerging economy. Academy of Management Journal, 2000, 43,50217.
Barney, J. Firm resources and sustained competitive advantage. Journal of Management,1991, 17, 99120.Barney, J. Looking inside for competitive advantage. Academy of Management Executive,
1995, 9, 4961.Batt, R. Managing customer services: Human resource practices, quit rates, and sales
growth. Academy of Management Journal, 2002, 45, 58797.Becker, B.E. & Gerhart, B. The impact of human resource management on organizational
performance: Progress and prospects. Academy of Management Journal, 1996, 39,779801.
Becker, B.E. & Huselid, M.A. High performance work systems and firm performance: Asynthesis of research and managerial implications. In K.M. Rowlands & G.R. Ferris
(Eds), Research in Personnel and Human Resource Management. Greenwich, CT: JAIPress, 1998.Busmeyer, J. & Jones, L.R. Analysis of multiplicative causal rules when causal variables
are measured with error. Psychological Bulletin, 1993, 93, 54962.Cappelli, P. & Neumark, D. Do high performance work practices improve establishment-
level outcomes? Industrial and Labor Relations Review, 2001, 54, 73775.Chamberlin, T.C. The method of multiple working hypotheses. Science, 1890, 15.
(Reprinted in Science, 1965, 148, 7549.)Cooper, C. In for the count. People Management, 2000, October, 2834.Delaney, J.T. & Godard, J. An IR perspective on the high-performance paradigm. Human
Resource Management Review, 2001, 40, 47289.Delaney, J.T. & Huselid, M.A. The impact of human resource management practices on
perceptions of organizational performance. Academy of Management Journal, 1996,
39, 91969.Delery, J.E. Issues of fit in strategic human resource management: Implications for research.
Human Resource Management Review, 1998, 37, 289309.Delery, J.E. & Doty, D.H. Modes of theorizing in strategic human resource management:
Tests of universalistic, contingency, and configurational performance predictions.
Academy of Management Journal, 1996, 39, 80235.Dyer, L. & Reeves, T. Human resource strategy and firm performance: What do we know
and where do we need to go? International Journal of Human Resource Management,1995, 6, 65670.
Fey, C.F., Bjrkman, I. & Pavlovskaya, A. The effect of human resource management prac-
tices on firm performance in Russia. International Journal of Human Resource Manage-ment, 2000, 11, 118.
Gerhart, B., Wright, P.M., McMahan, G.C. & Snell, S.A. Measurement error in research
on human resources and firm performance: How much error and does it influence effectsize estimates? Personnel Psychology, 2000, 53, 80334.
Wall & Wood The romance of HRM 4 5 9
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
33/35
Godard, J. A critical assessment of the high-performance paradigm. British Journal ofIndustrial Relations, 2004, 42, 34978.
Guest, D. Human resource management and performance: A review and research agenda.
International Human Resource Management, 1997, 8, 26376.Guest, D. & Hoque, K. The good, the bad and the ugly: Employee relations in new non-
union workplaces. Human Resource Management Journal, 1994, 5, 114.Guest, D.E., Michie, J., Conway, N. & Shehan, M. Human resource management and
corporate performance in the UK. British Journal of Industrial Relations, 2003, 41,291314.
Guthrie, J.P. High involvement work practices, turnover and productivity: Evidence fromNew Zealand. Academy of Management Journal, 2001, 44, 18090.
Guthrie, J.P., Spell, C.S. & Nyamori, R.O. Correlates and consequences of high involve-
ment work practices. International Journal of Human Resource Management, 2002,13, 18397.
Hoque, K. Human resource management and performance in the UK hotel industry. British
Journal of Industrial Relations, 1999, 37, 41943.Huselid, M.A. The impact of human resource management practices on turnover, produc-
tivity, and corporate financial performance. Academy of Management Journal, 1995,38, 63572.
Huselid, M.A., Jackson, S.E. & Schuler, R.S. Technical and strategic human resource
management effectiveness as a determinant of firm performance. Academy of Manage-ment Journal, 1997, 40, 17188.
Ichniowski, C. Human resource management systems and the performance of US manu-facturing businesses. Working paper No. 3349. Cambridge, MA: National Bureau ofEconomic Research, 1990.
Ichniowski, C., Shaw, K. & Prennushi, G. The effects of human resource management prac-
tices on productivity. American Economic Review, 1997, 87, 291313.Jayaram, J., Droge, G. & Vickery, S.K. The impact of human resource management prac-
tices on manufacturing performance. Journal of Operations Management, 1999, 18,120.
Kalleberg, A.L. & Moody, J.W. Human resource management and organizational perform-ance. In A.L. Kalleberg, D. Knoke, P.V. Marsden & J.L. Spaeth (Eds), Organizations inAmerica: Analyzing their structures and human resource practices. Thousand Oaks, CA:Sage, 1996.
Koch, M.J. & McGrath, R.G. Improving labor productivity: Human resource management
policies do matter. Strategic Management Journal, 1996, 17, 33554.Lawler, E.E. High involvement management. San Francisco: Jossey-Bass, 1986.
Lawler, E.E., Mohrman, S.A. & Ledford, G.E., Jr. Creating high performance organiz-ations. San Francisco: Jossey-Bass, 1995.
Lawler, E.E., Mohrman, S.A. & Ledford, G.E., Jr. Strategies for high performance organiz-ations. San Francisco: Jossey-Bass, 1998.
MacDuffie, J.P. Human resource bundles and manufacturing performance: Organizational
logic and flexible production systems in the world auto industry. Industrial and LaborRelations Review, 1995, 48, 197221.
Marchington, M. & Grugulis, I. Best practice human resource management: Perfect oppor-
tunity or dangerous illusion? International Journal of Human Resource Management,2000, 11, 90525.
Miles, R.E. & Snow, C.C. Designing strategic human resource systems. Organizational
Dynamics, 1984, 13, 3652.Osterman, P. Work reorganization in an era of restructuring: Trends in diffusion and effects
on employee welfare. Industrial and Labor Relations Review, 2000, 53, 17996.Patterson, M.G., West, M.A. & Wall, T.D. Integrated manufacturing, empowerment and
company performance.Journal of Organizational Behavior, 2004, 25, 64165.
Human Relations 58(4)4 6 0
by guest on March 6, 2013hum.sagepub.comDownloaded from
http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/http://hum.sagepub.com/8/13/2019 Human Relations 2005 Wall 429 62
34/35
Pfeffer, J. Competitive advantage through people: Unleashing the power of the workforce.Boston: Harvard University Press, 1994.
Philpott, J. Productivity and people management. London: Chartered Institute for Person-nel Development, Perspective Series, Spring, 2002.
Richard, O.C. & Johnson, N.B. Strategic human resource management effectiveness and
firm performance. International Journal of Human Resource Management, 2001, 12,299310.
Schuler, R.S. & Jackson, S.E. Linking competitive strategies with HRM management strate-
gies. Academy of Management Executive, 1987, 1, 20719.Vandenberg, R.J., Richardson, H.A. & Eastman, L.J. The impact of high involvement work
processes on organizational effectiveness. Groups and Organization Management,1999, 24, 30099.
Wall, T.D., Michie, J., Patterson, M., Wood, S.J., Sheehan, M., Clegg, C.W. & West, M.A.On the validity of subjective measures of company financial performance. PersonnelPsychology, 2004, 57, 95118.
Walton, R.E. From control to commitment in the workplace. Harvard Business Review,1985, 63, 7784.
Way, S.A. High performance work systems and intermediate indicators of firm perform-
ance within the US small business sector.Journal of Management, 2002, 28, 76585.Womack, J., Jones, D.T. & Roos, D. The machine that changed the world. New York:
Rawson, 1990.
Wood, S.J. Human resource management and performance. International Journal ofManagement Reviews, 1999, 1, 367413.
Wood, S.J. & de Menezes, L. High commitment management in the UK: Evidence from
the Workplace Industrial Relations Survey and Employers Manpower and Skills Prac-tices Survey. Human Relations, 1998, 51, 485515.
Wood, S.J. & Wall, T.D. Human resource management and business performance. In P.B.Warr (Ed.), Psychology at work. Harmonsworth: Penguin, 2002.
Wright, P.M. & Gardner, T.M. The human resourcefirm performance relationship:
Methodological and theoretical challenges. In D. Holman, T.D. Wall, C.W. Clegg, P.
Sparrow & A. Howard (Eds), The new workplace: A guide to the human impact ofmodern working practices. Chichester: Wiley, 2003.
Wright, P.M., Gardner, T.M. & Moynihan, L.M. The impact of HR practices on the
performance of business units. Human Resource Management Journal, 2003, 13,2136.
Wright, P.M., Gardner, T.M., Moynihan, L.M., Park, H.J., Gerhart, B. & Delery, J.E.
Measurement error in research on human resources and firm performance: Additional
data and suggestions for future research. Personnel Psychology, 2001, 54, 875901.Wright, P.M., McCormick, B., Sherman, W.S. & McMahan, G.C. The role of human
resource practices in petro-chemical refinery performance. International Jo
Recommended